MORINE BANAY ROJAS, ACCOMPANIED BY HER HUSBAND OSCAR ROJAS AND CARINA BANAY TOLEDANO, ACCOMPANIED BY HER HUSBAND MARINO TOLEDANO, PETITIONERS, VS. THE HON. COURT OF APPEALS AND …

On July 8, 1952, Carina Banay Toledano and Morine Banay Rojas, owners of parcels of sugar land in Murcia, Negros Occi­dental, separately leased them to Felix P. Amante, with all the improvements thereon and the sugar
quota allotments appertain­ing thereto. 
The contracts of lease executed by the parties were for a period of ten
years beginning with the agricultural year 1952-53 up to and including the crop
year 1961-62.  Both contracts of lease
contained a common provision, to wit:

“That this lease shall be for a period of TEN (10) years
beginning the agricultural year 1952-53; more specifically from the date of
this contract and up to and including the crop year 1961-62, both inclusive,
with option for another FIVE (5), years on such terms and conditions as may be
agreed upon between the same parties.”

Toledano, on July 13, 1960, wrote Amante
a letter inform­ing him of her intention not to have the period of the lease
extended for five more years because she intended to personally undertake the
cultivation of her share of the leased sugar lands.  Rojas com­municated a similar intention to Amante on February
13, 1961.  In reply, Amante informed Toledano and
Rojas of his intention to
exercise the option granted to him under the contracts to continue with the
lease.

Sometime in the month of December, 1961, Toledano
and Rojas took possession of such parts of their respective sugar lands where
the 1961-62 sugar cane crops had already been harvested and milled, in order to
prepare the said lands for the ensuing crop year.

Due to the misunderstanding between them and the avowed intention
of Amante to avail himself of the provision in the
con­tracts for extension of the lease period for an additional five years, Amante filed the present action with the Court of First
Instance of Negros Occidental.  The lower courts, after hearing the evidence,
ruled for Toledano and Rojas, and held the option
invalid for failure to stipulate the terms and conditions of the lease during
the five-year period covered by the provision in question.

Amante appealed to the Court of Appeals
which reversed the decision of the lower court. 
The appellate court ruled that the provision for the extension of the
lease period for another five years was obligatory, and stated that

“lessee appellant was given that option to renew upon the
termination of the original period, but upon such terms and conditions as the
parties should thereupon agree, and if they should not thereupon agree, then
the terms and conditions shall be upon ‘reasonable terms’ as said in Slade v.
Lexington, supra, wherein the Court might have to step in; this interpretation
would give full force and effect to the stipulation, which it should have,
without doing violence to the will of the par­ties …”

Toledano and
Rojas filed a motion for reconsideration of the appel­late court’s
decision.  After its denial, Toledano and Rojas lodged the present petition for certiorari
to review the decision of the Court of Appeals and its resolution denying their
motion for recon­sideration.

The petitioners argue that the respondent appellate court gravely
erred (a) in holding that the stipulation in question, “with option for
another FIVE (5) years on such terms and conditions as may be agreed upon between the same parties,” clearly means that
the option imposes upon the petitioners the compulsory obli­gation to extend
the period of the lease, although the contracting parties still have to agree
upon the “reasonable terms” for the extended period; (b) in ignoring
the contemporaneous words and acts of the contracting parties to the lease in
the determination of their true intention; and (c) in ignoring the fact that Amante violated the terms of the contracts of lease.

Resolution of the issue in the present appeal hinges upon the
proper interpretation of the stipulation in question which pro­vides,
“with option for another FIVE (5) years on such terms and conditions as
may be agreed upon between the same parties.”

The petitioners contend that the stipulation in question im­poses
upon them no obligation to grant an extension of the lease period for an
additional five years.  Citing articles
1370 and 1371^[1]
of the Civil Code, the petitioners claim that, in accordance with these
provisions, the intention of the parties must prevail and govern the
contracts.  The petitioners maintain
that, as original­ly understood and agreed upon by the parties, the stipulation
was intended and was accepted to mean that “(1) The parties would agree
whether or not the lease would be extended; (2) Then the de­tails would be
further agreed upon by the parties.” Continuing, the petitioners claim
that no contract as to the extension exists because “if this proviso could
be considered as part of a contract the object and the cause of the agreement
should have been clear.  The fact is
that, although the land to be leased was known, the consideration for that
lease was not agreed upon.” Hence, there being an absence of price certain
“because the price would be ‘as may be agreed upon between the same parties,’
[and] there was no assurance that the price would be agreed upon,” the
petitioners state that “there is no contract until those details have been
agreed upon, or at least until the basis or guidelines for the agree­ment have
been ascertained.”

The petitioners further argue that even if the option be
considered as an offer, still, the same imposes upon the parties no compulsory
obligation to negotiate on the terms and conditions for the extension.  Considering, they state, the life of the
original lease as the period within which their offer could be ac­cepted, they
were permitted to withdraw said offer anytime be­fore the original period of
the lease expired, in consonance with article 1324^[2]
of the Civil Code.

For his part, the respondent Amante
claims the original period of the lease as compulsorily extendible under the
option in the contracts.  He contends
that the option, a privilege given to him to continue or not with the lease
after the expiration of the original period, cannot be brushed aside unilaterally
by the peti­tioners, having been agreed upon bilaterally.  As to the terms and conditions applicable to
the extended period, Amante maintains that the option
should relate back to the contracts of lease and should be governed by the same
terms and conditions relative to the original lease period.  Amante also points
out that even if the option be considered an offer which the petitioners could
withdraw at anytime before his acceptance, still, the option implies the legal
obligation of the petitioners to keep the offer open to him until the
expiration of the period for the exercise thereof.

After a thoroughgoing examination of the record, we find that the
Court of Appeals, in its decision dated November 6, 1964, aside from ruling
that the option to extend the period of the lease is obligatory, also ordered
the retention by Amante of the leased sugar lands
“in the meantime that the parties have not agreed as to the reasonable
terms of the contract, for the extended period of five (5) years, under the same
terms and conditions in the origi­nal contract.” The petitioners, in their
motion for reconsideration filed with the Court of Appeals on December 1, 1964,
admitted the actual possession and enjoyment of the leased premises by Amante for two (2) crop years (1962-1963 and 1963-1964) –
which crop years represent the
first two years of the five-year additional pe­riod provided for in the
contracts of lease – on account of the pen­dency of
the appeal.

Thus, this Court, considering the foregoing and noting the
expiration in 1967 of the five years (corresponding to the period of extension
of the lease contract) as well as the absence in the record of any indication
of a contrary situation, required the parties, in a resolution dated February
19, 1971, to show cause why the case at bar should not be dismissed as moot and
academic.

The petitioners complied with the resolution of this Court by
filing their manifestation on April
23, 1971, agreeing to the dismissal of this case for being moot and
academic.  The respondent has not filed
any written objection.

The turn of events, in the case at bar, clearly renders
resolution of the merits of the controversy purposeless.  The lapse of time or, to be exact, the
expiration in 1967 of the five-year additional period for the efficacy of the
lease contracts, forecloses any determination as to the juridic
nature of the stipulation in question – whether or not the same imposes upon
the petitioners a compulsory obligation to allow the respondent Amante to continue with his occupancy of the leased
premises.  Anent the problem of the terms
and conditions applicable to the expired five-year addi­tional period, the
Court of Appeals specifically required the par­ties to abide by the same terms
and conditions provided for in the original contracts of lease, and by these
the parties have, from all indications, abided.

ACCORDINGLY, this case is hereby dismissed, for being moot
and academic.  No costs.

Concepcion, C.J., Reyes, Dizon, Makalintal, Zaldivar, Fernando, Teehankee, Barredo, Villamor, and Makasiar, JJ., concur.

^[1]
Article 1370.  If the terms of a contract
are clear and leave no doubt upon the intention of the contracting parties, the
literal meaning of its stipulations shall control.

If the words appear to be contrary to the evident intention
of the parties, the latter shall prevail over the former.

Article 1371.  In
order to judge the intention of the contracting parties, their contemporaneous
and subse­quent acts shall be principally considered.

^[2]
Article 1324.  When the offeror has allowed the offeree a
certain period to accept, the offer may be withdrawn at any time before
acceptance by communicating such withdrawal, ex­cept when the option is founded
upon a consideration, as something paid or promised.